BY SURYA PRATAP
Petrol prices have now surpassed Rs 100 in at least six states, following a Rs 4.9 per litre increase since the beginning of May. Last month, Bhopal became the first state capital to reach the three-digit barrier, followed by Jaipur and Mumbai.
Hyderabad and Bengaluru are now approaching the psychological milestone. Fuel costs in India varies from state to state due to local taxation (VAT) and freight charges. Apart from that, motor fuels are subject to an excise levy imposed by the federal government.
HOW HAS THE INCREASE IN CRUDE OIL PRICES AFFECTED THE COST OF FUEL?
As the world economy recovers from the Covid-19 pandemic, the price of crude oil has risen dramatically in 2021 on the back of a resurgence in worldwide demand. Brent crude has increased by 37.1 percent to almost $71 per barrel, up from $51.8 per barrel at the start of the year. The price of gasoline and diesel is based on a 15-day rolling average of international gasoline and fuel prices.
Current petrol prices, however, are much higher than those in FY14, when India’s crude basket averaged $105.5 per barrel.
In 2010, the price of gasoline was deregulated, while the price of diesel was deregulated in 2014. Petrol was selling at Rs 63.09 per litre, or about Rs 76.6 per litre, in June 2013, when India’s average crude basket was at $101 per barrel.
Diesel prices peaked at Rs 75.7 per litre in October 2018, when the average cost of India’s crude oil basket was $80.1 per barrel.
IMPACT OF TAXES
Even if the price of crude oil is only 3.5 percent higher than it was at the beginning of 2020, before the Covid-19 epidemic caused a sharp drop in demand for crude oil, increasing central and state taxes on petrol and diesel are the main reason for record high prices of petrol and diesel.
In Delhi, national and state taxes account for roughly 57 percent of petrol pump costs and 51.4 percent of diesel pump pricing. The central government raised excise duty on petrol by Rs 13 per litre and diesel by around Rs 16 per litre in 2020 to boost revenues after the epidemic caused a dramatic drop in economic activity.
While several states, including Rajasthan, West Bengal, Assam, and Meghalaya, have reversed state tax hikes made during the pandemic, the central government has refused to decrease central taxes, despite the RBI’s recommendation that taxes on vehicle fuels be reduced to reduce inflation. In the national capital, central levies account for 71.8 percent of all gasoline taxes and 60.1 percent of total diesel taxes.
According to Pradhan, the government is not considering any reductions in gasoline and diesel taxes at this time. According to him, “Earnings are currently lower. We are unable to make a cost-cutting concession. The health-care sector’s spending has grown “.
Surya Pratap is a Law Student at Galgotias University & Associate Editor at Lasdes E-Journal